While speaking at the McLeod Software user conference on Aug. 26 in Denver, economist Bob Costello said that small fleets who rely primarily on the spot market to find loads could be in real trouble for the next 18 months.
In 2019, the spot market has fell to relative lows compared to the banner year of 2018. The spot market is 15% of volumes in the freight market and those volumes are down 50% from last year, he said.
Costello, chief economist for the American Trucking Associations, used the word “bloodbath” to describe the precarious situation of such fleets. Following the conference, he posted a feed on Twitter to explain that he was not referring to the trucking industry at large, as contract rates have held steady.
“There are real and underlying issues in the spot market – especially since last year’s freight boom led to a variety of driver pay increases and incentives like weekly pay that are now in conflict with falling spot market rates,” he wrote.
If trends in the spot market continue, fleets that primarily operate in that market will struggle for survival.
“While we don’t know the exact size of the spot market, the vast, vast majority of freight is contract freight, not the spot market. In fact, many medium to large truckload carriers have very little exposure in the spot market. And the contract market is healthy right now,” he continued.
ATA’s monthly tonnage index show that the trucking industry is doing “quite well,” after falling from historic highs in 2018.
“There are still looming threats, just as there are looming threats to the broader economy. However, predicting catastrophe based on the spot market, while ignoring the larger contract market is irresponsible alarmism,” he wrote.